Credit cards still aren’t for everyone. But, according to U.S. News, 35% of cardholders pay off their balances each month. These consumers are likely in the best position to rake in rewards and other benefits.
Credit card perks range from those that require little or no effort by the credit card user all the way up to advanced, calculated tactics used to maximize rewards.
Some examples highlighted below are extreme and are shown just to illustrate what’s possible, not as an endorsement. Use at your own risk.
That said, here’s how you can earn or save money with credit cards.
Enticing airline rewards
Credit card rewards can be extremely valuable for air travel and sometimes more so than than the average user realizes. Flying does earn frequent flyer miles, but credit card offers may be a better source for miles.
One advantage of credit cards: they can return many more miles by spending less money and without ever going up in the air. A common offer might be 30,000 to 50,000 miles as a sign-up bonus on credit cards, which is often enough miles for one or two flights.
The only requirement to earn these rewards is often a minimum spend in a certain period. A standard offer might require $1,000 in spending within the first three months, which is easily attainable with many cardholder’s budgets.
While the casual mileage earner might earn a few hundred thousand miles without much effort, “travel hackers” maximize credit card rewards to earn much more. They apply for several of these bonuses and use tactics like buying gift cards on credit to fulfill the spending requirements.
There are added bonuses to these cards, too. Many airlines offer a free checked bag, and sometimes for multiple people in your party. This is typically worth $25 per person on each flight, which would save $200 or more for a family of four round-trip.
Crazy cash back
Cash-back offers can come up big, too. While some cards offer 1-3% cash back on typical purchases, others offer 5% when spending in certain categories, like groceries or gas.
For even more savings, card users can shop through credit card online “stores.” Discover Card offers 5-20% cash back when you access certain online retailers through Shop Discover.
I routinely earn 15% back for Groupon purchases by doing nothing more than clicking a button on Discover Card site before making my purchase. Many other national retailers, including Walmart, Home Depot, and Target, offer 5% back.
Less on loan payments
Credit card users can leverage 0% offers for not only credit card balances but other loans, too.
According to CardHub, eight of 11 major credit card issuers will allow you to transfer an auto loan balance to their credit cards. Seven of these will allow the same for other types of loans, including mortgages, auto loans, small business loans, and student loans.
This typically involves transferring a loan balance to a credit card that offers zero interest for a certain term. Credit card users can either pay off the balance before interest charges are applied or transfer the balance to another card.
Avoid costlier loans
While I often talk about how disastrously-high credit card interest rates are, the truth is they aren’t the worst loans available. Pawnshop, payday, and car title loans often come with interest rates over 100% APR plus other fees.
If you were truly faced with choosing to finance a purchase with a credit card or one of these high-interest loans, credit card interest costs less almost all the time.
Most of these bad loans are often touted as being okay for short-term money, but credit cards still win in this case, too. Credit cards typically offer a grace period to pay off your purchase without interest, whereas these other loans often don’t.
Included warranties and insurance
Extended warranties are often expensive and may go unused. They’re often just a money maker for the retailer.
With many credit cards, extended warranty coverage is free. Standard coverage might double the manufacturer’s warranty for up to one additional year, with limits around three to five years on the original warranty.
I tested this out recently when my iPhone broke and the Apple warranty had ended. After submitting some paperwork, my claim was approved and I received a check for $200.
Don’t forget about rental car insurance, too. If you don’t have coverage through your personal auto insurance policy, car rental agencies may require or pressure you into buying coverage from them. If your credit card has it covered, you can avoid paying extra for car rental insurance you might not need.
Avoids costs of using cash
Using cash is often less convenient than using credit cards, and accessing your cash isn’t always free, either.
A few reasons to avoid cash include:
- ATM fees to withdraw cash. Using another bank’s ATM costs around $3 each time you withdraw money.
- Overdraft fees. There are none for credit cards, but you’ll be out $30-$35 if you overdraft a bank account.
- Losing cash. If you lose cash, it’s likely gone forever. Losing a credit card means calling to replace it and disputing any fraudulent charges to have them removed.
Integration with money-saving apps
Does the tediousness of logging cash transactions stop you from keeping a budget? Using credit cards helps solve this.
Credit cards work with dozens of mobile apps now. But the biggest savings can come with apps that pull credit card transactions and categorize them to help generate a budget and track spending. Using these apps help you target high-spending as you’ll see where every dollar is going.
Even if you don’t use apps, itemized credit card statements make tracking your spending easy compared to using cash.
Building credit history for other loans
Credit cards are a major part of building credit. They impact every aspect of how a credit score is calculated. Using them correctly means you can improve your credit score and reap the benefits on other loans.
These benefits can be huge, too. The difference between a good or a bad credit score can be thousands of dollars in interest on auto loans and tens of thousands for home mortgages.
Of course, if you lack a credit history or have a poor score, you might not have access to credit at all.